A contractor named Mathis built a house under a cost-plus contract for the Cripes. The homeowners sued for $88,000, claiming fraud and embezzlement over cost overruns and payment disputes. The bankruptcy court ruled the debt was dischargeable because cost disputes and contract breaches don't count as fraud—the homeowners had to prove actual fraud, which they didn't.
Cost overruns and payment disagreements in cost-plus contracts are normal contract disputes, not fraud. You can't get a debt declared nondischargeable just because the final bill exceeded estimates.
If a contractor files bankruptcy, homeowners must prove actual fraud or embezzlement with solid evidence. Vague complaints about money or missing documentation won't cut it in court.